WHERE'S THE BEEF?

Where's the Beef?

“Where’s the beef?”

“There you go again…”

And, don’t forget the scream.

During the debates leading to the Democratic nomination in 1984, former Vice President Walter Mondale famously asked his opponent, Senator Gary Hart (D-CO), "where's the beef?"  He was challenging Hart to provide details instead of just visionary concepts.  Hart was talking about the need to support entrepreneurship since small businesses create about 90% of the jobs in this country (about 28 years before it was popular to talk about it).  But, Mondale stole the show with his one liner cribbed from a popular Wendy's TV Commercial and that’s how the news reported it.

GOP presidential candidate Mitt Romney was in London last week.  He needs a few smiling shots with foreign leaders to bolster his campaign.  But, whatever his purpose, it has been sidetracked by the sideshow resulting from his rather innocuous remarks about the London Olympics.  I have listened to his Brian Williams interview – the whole thing not just the sound bites – and I didn’t think he said anything so awful.  But, we live in a world where every word and phrase is parsed by the press, interpreted, reinterpreted and misinterpreted.

Of course, the master of managing the media was the “Great Communicator”, President Ronald Reagan.  His supporters enjoyed his bravado.  Remember when he said, “I paid for this microphone…”  It was during the New Hampshire Republican candidate debates in 1980.  He used the line to keep the moderator from cutting him off.  That line got played and replayed by TV news.  No one bothered to point out that he stole the line from a Spencer Tracy-Katherine Hepburn movie called State of the Union in which Spencer Tracy was – you guessed it – running for President of the United States.  And, of course, no one remembers the issues being debated as well as they remember that line.

Perhaps Reagan’s most famous debate line was, "There you go again..." responding to then President Jimmy Carter during the presidential debate later that same year when Carter was challenging Reagan’s position on Medicare.  The Medicare debate is hardly remembered but the line is. 

And, what about Howard Dean's scream?  The former Vermont Governor and 2008 presidential candidate got a bit overexcited at a rally and let out a yahoo that offended the sensibilities of… well, almost everybody.  The governor was leading in the polls to that point.  But, the scream which was played and replayed by all the news outlets… that scream was his undoing. 

Governor Romney has been through this drill before.  He famously said, “I am not worried about the poor” and was raked over the coals for that.  Did you hear the whole statement?  What he actually said was that he wasn’t worried about the very rich who are obviously doing well or the poor who have a safety net; he was worried about the middle class.  As an aside, he added that if the safety net has some holes in it, he would fix them.  Does that sound like what was reported? 

President Obama knows what it’s like, too.  He is being attacked for saying that entrepreneurs weren’t responsible for building their own businesses.  Here is the exact quote:  “If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen.”

Was he talking about the businesses or the roads and bridges?  Well, if you have the opportunity to read or listen to the whole statement, you can decide for yourself.  But, the media typically clips out the sound bite that will be most inflammatory.  So, they decide for you. 

Isn’t it interesting that the sound bites of the 80’s were taken out of the context of issues we are still debating today?  Medicare, entrepreneurship?  Shouldn’t the media be doing a deep dive on those topics?  The answer is obvious.  Instead, watching the news makes me wonder:

Where’s the beef? 

The Right is Wrong and the Left is Not Right

I like to think of myself as a political moderate.  And, it must be true since I managed to irritate both conservatives and liberals with my last post, Good, Better, Best... Never Let It Rest.

Oh, I got a few “atta boys”.  “Nice job, John”  “Keep it up”, etc.  However, overwhelmingly, I got the type of response I was hoping not to. 

It boils down to this:  the Right believes that Obama is a Socialist and that there can be no compromise with that element.  The Left rationalizes Obama’s record of economic non-achievement by citing irrelevant examples. 

Well, in the interest of continuing to irritate both sides, let me just say it:  The Right is Wrong and the Left is Not Right. 

There is an emerging monologue among those on the Left.  They postulate that government should raise taxes, invest in infrastructure and that somehow private enterprise will invest in R&D and create jobs.  One respondent asserted that “trickle down” doesn’t work but that “trickle up” does.  Their example is the 1950’s, a decade of the highest growth in our history coincident with the highest tax rates in our history.  I like to point out that “correlation is not causation”.  That high growth coincided with high taxes does not mean that taxes don’t reduce growth.  But, that seems to fall on deaf ears.

The major objection I have to this line of thinking is that no one wants to believe the data.  And, the data show that government spending does not get a financial return.  The “multiplier effect” where a dollar of capital investment gets 2 dollars in return has been shown to work with private investment but not with government spending.  There have been numerous studies demonstrating this result.  I will point out just one.

Liberal economist, Christine Romer, President Obama’s first Chair of the Council of Economic Advisors, wrote "The Macroeconomic Effects of Tax Changes" while she was an economics professor at University of California at Berkeley in 2007.  She concludes, in part, that “tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes. The large effect stems in considerable part from a powerful negative effect of tax increases on investment.”

Investment has a multiplier effect on GDP and improves employment prospects.  True, robust growth in the 1950’s was coincident with high tax rates.  It is also true that robust growth in the 19th Century was coincident with NO income tax. 

Now, I am not saying we should reduce taxes or even that we shouldn’t increase taxes.  I am simply saying we need to understand the impact of taxes and ask ourselves how much growth we are willing to sacrifice for the government we want. 

Conservatives for their part advocate further tax reduction.  The Supply Side theories of Arthur Laffer were the underpinning of Reagan’s economic policies and they have served us well.  They are right.  They served us well for about 20 or 25 years.  However, in the last decade middle class wages have stagnated while the costs of healthcare and education have skyrocketed. 

As for “trickle down economics”…  Well, there is no such proven economic theory.  It’s more of a political phrase than an economic theory.  And, lately, not much is trickling down. 

Governance is more than just economics.  In colonial times, our founding fathers recognized the need to address the common good, the need to place each selfish and separate interest in the context of the “res publica”, literally the “public thing”. 

Conservatives need to recognize that government should play a role in helping its people through the transition to a global economy and liberals need to recognize that we need a sustainable financial platform to provide for it.

In his Sunday Op-Ed piece, author and New York Times columnist Tom Friedman advocated that we focus on supporting entrepreneurship and suggested “…we should aspire to be the world’s best launching pad because our work force is so productive; our markets the freest and most trusted; our infrastructure and Internet bandwidth the most advanced; our openness to foreign talent second to none; our funding for basic research the most generous; our rule of law, patent protection and investment-friendly tax code the envy of the world; our education system unrivaled; our currency and interest rates the most stable; our environment the most pristine; our health care system the most efficient; and our energy supplies the most secure, clean and cost-effective.”

Our political debate should be about how to achieve the objectives so concisely presented in Friedman’s column.  Instead we have, thus far, been treated to more of the same unproductive, partisan nonsense that has caused us to fail to address our long term challenges since the turn of the century.  Is it any wonder that an increasing number of voters identify themselves as independents.?

Obama and Romney are serious, intelligent people with a sincere desire to advance the American cause and very different approaches to doing so.  I can only hope that the presidential debate will turn to that discussion.

WHO WILL LEAD?

            Recommended reading:

                        The Center on Budget and Policy Priorities

                        The Microeconomics Blog

                        Proceedings of the National Academy of Sciences of the United States

Good, Better, Best... Never Let It Rest

When I was a kid, my mother taught me a little poem by way of encouraging me to be my best.  It went like this:

Good, better, best

Never let it rest

Until your good is better

And your better, best

My grandparents emigrated here from the old country, Mom reminded us.  We were obligated to take advantage of that opportunity.  We weren’t expected just to be good; we were expected to be exceptional.

Our political discourse is littered with the term “American exceptionalism” these days.  Conservatives like to remind voters of the loss of traditional values and its impact on society and our place in the world.  Liberals point out that our greatness was enabled by government and social structures that were the creation of a central government.   

America is, indeed, exceptional largely because it has some inherent advantages.  One must start with geography.  We are the only country in the world with long navigable coasts on both the Atlantic and Pacific and we have a natural river system that seems to have been designed to deliver goods to seaports for shipment overseas.  Our land is fertile and our climate diverse enough to produce a vast array of agricultural products. 

Our second advantage is cultural.  The earliest English settlers in the 17^th Century were adventurers determined to forge a new world.  The charter for the settlement in Plymouth, Massachusetts from James I permitted the establishment of a republican government independent of the crown.  The founders of the United States were grounded in the philosophy of Locke, Spinoza, Voltaire and Adam Smith.  They gave birth to a nation that thrived on independence and achievement. 

Nineteenth century America was marked by a period of laissez-faire government that enabled entrepreneurs to create railroads and the telecommunications, steel and energy industries.  In turn, these developments enabled America to achieve global economic leadership in the 20^th Century. 

Like any nation, ours was founded by way of bloodshed as the early English, French and Spanish settlers fought with Native Americans and each other.  But, over a 150 year period, American global hegemony emerged from that bloodshed and through the strategic brilliance of American leadership.  Our mainland was secured and our economic future was insured by the Louisiana Purchase in 1803, the Mexican-American War of 1845 and the Spanish-American War of 1898. 

Oklahoma Land Rush

The founders were also keenly aware of the need for a government to provide opportunity for those less fortunate.  James Madison provided for the right to a free education and public land in the Virginia constitution.  The 19^th Century saw an immigrant-driven expansion into the Great Plains enabled by the Homestead Act of 1862 which provided free land to those adventurous enough to claim it.  This egalitarian culture of governance enabled immigrants over our 236 year history to make a better life for their children and in turn drive U.S. economic growth. 

The Industrial Revolution moved bread-winners off their farms and into factories.  That corporations were not the most humane of bosses led directly to the social reforms of the 20^th Century.  Laws protecting the right of collective bargaining, worker safety rules and the development of a “social safety net” were government’s response. 

The U.S. military, which had virtually created the steel industry in the 19^th Century, evolved after World War II into a “military-industrial complex” (a phrase coined by President Eisenhower) which fostered innovation through scientific research and led to space exploration, the development of the internet and the explosion of the electronics industry.

The U.S. education system – public schools and the university system – produced the best educated workforce in the world.  World War II’s destruction of foreign industrial capacity provided a window of opportunity in post-war America to thrive economically and attract vast inflows of capital investment.

Now, many of those trends are beginning to reverse themselves.  Our education system is no longer producing the best graduates.  The shift in our economy from manufacturing to services has motivated our best and brightest to abandon science and engineering in favor of finance and law.

Foreign Direct Investment in the U.S., which peaked at over $300B in 2000, had dropped 50% by 2010.   Meanwhile U.S. multinationals and investors have increased their investment overseas to new record highs – over $400B in 2009 remaining over $350B in 2011. 

How could a country with so many natural advantages come to this point in the 21^st Century?  How is it that our political class sees everything as a battle between two world views as opposed to seeing opportunity to build on our successes of the past?

Today’s political debates over education, immigration, healthcare and the national debt offer no hope of compromise.  There are well thought out solutions to each of these major social and fiscal issues.  They are well documented and understood by leading members of Congress and the Executive branch. Yet, each side of the political divide lives in fear of being "primaried" if they compromise the core principles of the extremes of their respective political parties. 

The political forces at play during our Revolutionary War and its aftermath were marked by fierce philosophical differences as well.  Indeed, there was doubt that the 13 colonies who had defeated the British could sustain as a single nation. Each had its own political philosophy, constitution and currency.  Many in the north advocated for union while many in the south feared the influence of money center banks and a central government.  There are echoes of this debate evident even today.  Yet, with a vision of what our nation could become, the founders compromised for the greater good.

The outcome was an exceptional compromise:  the United States of America. 

WHO WILL LEAD?